How to align buyer/supplier goals when tendering

6 December 2012
How do buyers and suppliers ensure the same direction, or ‘goal congruence’, which seems to be the expression of the day, in tendering for contracts? A UK Audit Commission report a decade ago cited six key reasons for ineffective procurement: 1. Legal complexity 2. Risk aversion 3. Perceived supply market weaknesses 4. Lack of client-side capacity 5. Narrow approach, and 6. Organisational culture. Authorities with the necessary skills and commitment overcome these challenges. Others must also seek to do so if they are to meet the duty of best value. A systematic approach to competitive procurement can help and the steps in this approach are as follows:
  • Lay the foundations: Using a strategic approach, have clear procedures, involving the right people and accessing the right skills.
  • Design: This stage is fundamental to service improvement. It involves strategic challenge, understanding the market, scoping the contract and the make or buy decision.
  • Bidding and contracting: This is the implementation stage when good project management and communication are essential.
  • Continuous improvement: Once the service is established it is important to maintain the momentum of improvement using rewards and motivation for the provider and a strong client-side function.
Buyers should ask themselves whether they have:
  • Strategic thinkers who are able to see the potential improvement in a service area;
  • A project manager with the skills, drive and commitment to convert that strategic vision into a practical scheme;
  • Financial expertise to establish the business case and to understand the costs of each of the components within the proposed scheme;
  • Legal support to deal with the details of the contract documentation;
  • Skilled negotiators who are competent to bring the scheme to a satisfactory conclusion; and
  • Contract managers to check that once the scheme is operational, it delivers services as intended.
Reflect on the resources you have in your purchasing or supply organisation to deal with these roles and activities. ☛ Stephen Ashcroft is a business consultant at Brian Farrington
£39,511 + substantial pension and benefits
Ministry of Defence: Defence Infrastructure Organisation
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